Category Archives: New Jersey Mortgage Modification FAQ

Are there different mortgage modifications options available through the HAMP program?

Yes, the HAMP program includes a few possible workout options that may be available to you. Possible mortgage loan modifications available under HAMP for borrowers in foreclosure or at imminent risk of foreclosure include, but are not limited to the following:

The Federal Housing Administration (FHA) is one of the biggest networks in the country that supports the HAMP loan modification programs. It has its own flagship HAMP program available for qualifying homeowners in or at imminent risk of foreclosure. The FHA-HAMP program gives qualifying borrowers with FHA insured loans to avoid foreclosure by entering into a modified mortgage loan with lower monthly payments. The FHA-HAMP program is notable in that allows for the inclusion of what is referred to as a partial claim. This partial claim is an interest free loan that can effectively make otherwise non-qualifying mortgage notes qualify for a modification. This partial claim note can be used to cover as much as thirty percent (30%) of a borrower’s delinquency, and it need not be repaid until the first mortgage note is paid off or if the borrower ceases to be the owner of the property.

The Department of Veterans’ Affairs (VA) offers its own modification program through HAMP. This program can provide veterans a great way to avoid losing their homes to foreclosure. VA-HAMP is a program that all VA home loans in foreclosure or at imminent risk of ending up in foreclosure will be considered for provided that the appropriate documentation is submitted in accordance with the plan. However, note that the VA requires that VA notes first be reviewed and denied for other traditional loss mitigation options before the borrower is considered for VA-HAMP.

FHA Short Refinance
Although it is not technically a HAMP affiliated program, the FHA Short Refinance is a great program for a distressed homeowner who is in foreclosure or at imminent risk of foreclosure. If your home is under water, meaning it is worth less then what is owed on your mortgage, you could potentially qualify for this option which may eliminate the difference between the worth and what is owed and lower your mortgage to a more controllable amount. This is very similar to the bailouts that allowed large companies to continue to conduct business without having to declare bankruptcy. In short, if it allows you to keep you in your home, it only positively affects you as well.

Home Affordable Unemployment Program (UP)
There are special programs set up for people who are unemployed, such as, the Home Affordable Unemployment Program or UP. You will still be able to obtain help to keep your home even if you do not have a steady income. In order to qualify for this program, you simply must qualify for unemployment benefits in your state. This is one way to obtain immediate help when you are unable to obtain it elsewhere. An attorney can better assist you and inform you more about this, including any special circumstances or possible restrictions that may exist.

If you are interested in learning more about mortgage modifications, or if you have any related questions call us today at (973) 500-8024 or (212) 960-8308, or submit your contact information below and we can contact you directly.

What are possible mortgage modification and/or workout options for distressed homeowners?

In normal circumstances homeowners in New Jersey and elsewhere do not have a legal right to obtain a mortgage modification, forbearance, short sale or other workout options, many if not most lenders and servicers have loss mitigation departments which evaluate homeowners for possible workout options to prevent the loss of homes in connection with foreclosures.

Commonly available workout options include but are not limited to the following:

Refinance: Refinancing could possibly be an option. HOPE for Homeowners is an FHA refinance loan options for qualifying homeowners. This was created to help protect qualified homeowners from foreclosure by preventing loan defaults. Refinancing is typically impractical for most homeowners without using a government program as the value of most homes are less than the amount that is owed on the loan.

Reverse Mortgage: A reverse mortgage is commonly used by senior citizens. It helps them to access the equity in their home for retirement. To use a reverse mortgage to prevent foreclosure, you typically must be 62 years of age or older and have equity in the property.

Mortgage Loan Assumption: A “due on transfer” provision is typically included in mortgage loans unless waived by the lender. If it is waived, it will allow an individual or entity to take over the obligation to make payments on the loan as long as they are qualified. Typically this is used to sell of the property to a third party. If the individual or entity assuming the payment obligation on the loan defaults, the lender can possibly release you from personal liability on the note.

Loan Guarantee Partial Claim: If you have mortgage insurance, your lender may provide a interest-free loan in order to help you bring your account current.

Reinstatement: You and your lender come to an agreement where you pay all amounts owed on the loan to bring your mortgage current including any and all late fees, attorney fees, taxes, insurance, etc. Once the amount is satisfied, then you will be back on your regular monthly payment schedule and the attorney for the lender will dismiss the foreclosure action against you.

Repayment Plan: You and your lender come to an agreement where resume making your regular monthly mortgage payments, in addition to an agreed upon amount each month until you have paid the owed arrears to reinstate the loan.

 Loan Modification: This is where the lender agrees to make changes to the terms of your mortgage allowing you to remain in your home. The terms that may be subject to charge are extending the amount of time you have to pay off the loan in full, reducing your interest rate, converting an adjustable rate loan to a fixed rate loan, or adding the missed payments and late fees, etc. to the back end of your loan.

Forbearance Agreement: A forbearance agreement allows borrowers to repay the delinquency of a loan over a period of time. Your regular monthly payment would be made an addition to an agreed upon monthly payment to apply to the delinquent amount. Once the amount of the delinquency is paid in full, your normal monthly payments will resume. Sometimes a forbearance plan will include additional incentives such as a suspension or reduction of payments for a period of time allow you to make up the default. They may also provide you time to pay you regular monthly mortgage payment only prior to the beginning of the repayment of the arrears. A repayment may be allowed for a period of six months and allow reasonable foreclosure and late fees to be included as part of the repayment schedule. However, they arrears may only be collected once the loan has been reinstated.

Extension Agreement: This is where you pay a lump sum of the amount of your delinquency up front, and the remaining amount is added to the back end of your loan.

Principal Forbearance: A Forbearance is the repayment of a portion of the principal interest-free. The original borrowed amount on your mortgage loan less any payments that you make until the loan is paid in full or the property is sold is the principal amount due and payable at maturity of the loan. The payments on the loan partially, amortize the loan.

Principal Reduction: This is where the lender agrees to reduce the principal amount owed on the loan. This is possible if you have a negative amortization loan.  A negative amortization loan is where you are paying less than is required to pay off the loan in full during the loan’s term.  The lender would reduce the principal to the original loan amount. In exchange for the principal reduction, a shared appreciation mortgage (SAM) may be required. This is a fixed rate, fixed term loan. You would agree to release a portion of the home’s future value in exchange for a lower interest rate.

Short Sale: This is the sale of the property for less than what you owe on the mortgage. Lenders may consent to you selling the property at a lesser amount and lose out on collecting the fees associated with foreclosure, because it preferable to foreclosure action as lenders face the risk of substantial loss from litigation and other related costs associated with a foreclosure action and including real estate taxes and insurance. With a short sale, the lender may agree to relieve you of liability for any deficiency.

Deed in Lieu of Foreclosure: This is where you voluntarily agree to conveying your property to the lender in by executing a Deed. In exchange for you executing a deed the lender will cancel the debt you owe on the loan. The lender will typically agree to forgive the deficiency that may remain on after the house is sold. Once the deed is executed and returned, the lender will no longer move forward with foreclosure proceedings or dismiss any foreclosure action against you.

Voluntary Surrender/Cash for Keys: This is where your lender may offer you money to vacate the premises prior to a sheriff sale. The house must be in good condition without any damages caused by you.

Please note that although each of the above referenced loss mitigations possibilities exists, this should not be taken to imply that your lender or servicer offers any or all of these workout solutions. Further note that in the event that your lender or servicer offers one or more of these solutions to some borrowers does not mean such solutions are available to all customers. Related to this, through the loss mitigation application process the finances of distressed borrowers are evaluated to determine whether the relevant borrowers have the financial wherewithal to make a payment that is satisfactory from the lender or servicer’s perspective. Moreover, when being reviewed in connection with the loss mitigation process, banks consider the reason a borrower default, the appraised value of the property and the amount of the arrearages, in addition to a borrower’s’ ability to pay.

If you are interested in learning more about mortgage modifications, forbearances, cash for keys or other mortgage workout option, or if you have any related questions call us today at (973) 500-8024 or (212) 960-8308, or submit your contact information below and we can contact you directly.

What is the Obama HAMP program for borrowers?

The Home Affordable Modification Program (HAMP) is a federal government program designed to assist homeowners who are suffering an economic hardship. HAMP attempts to restructure your monthly mortgage payment so that it is affordable. The program has a goal of providing participant with a monthly mortgage payment that is not more than thirty-one percent (31%) of the troubled borrower’s gross (pre-tax) monthly income to make your payments more affordable.

You may be eligible to apply if you meet all of the following:

• The house is your primary residence.
 You obtained your mortgage on or before January 1, 2009.
 Your mortgage payment is more than thirty-one percent (31%) of your monthly gross (pre-tax) income.
 You owe up to $729,750 on your home.
 You have a financial hardship and are either delinquent or in danger of falling behind.
 You have sufficient, documented income to support the modified payment.
You must not have been convicted within the last ten years of felony larceny, theft, fraud or forgery, money laundering or tax evasion, in connection with a mortgage or real estate transaction.

It is important to note that HAMP is a complicated program with many nuances. In fact, there are even different variations of HAMP, including a HAMP 1.0 and a HAMP 2.0 program. HAMP 2.0 is a newer variation of the HAMP program that was created to benefit some previously non-qualifying borrowers. As opposed to the HAMP 1.0 program, HAMP 2.0 relaxes some of the more stringent requirements of HAMP, including the requirement that the applicant reside in the property. Because of these complexities, people often obtain professional guidance to navigate them through the often daunting modification application process.

If you are interested in learning more about mortgage modification, including those available under the HAMP program, or if you have any related questions call us today at (973) 500-8024 or (212) 960-8308, or submit your contact information below and we can contact you directly.

What is a mortgage modification?

A Loan Modification is a temporary or permanent change in one or more of the terms of your loan agreement. Most typically, a modification restructures your loan to provide borrowers with more manageable terms. It is important to note that borrowers do not have an absolute right to a modification, and therefore the bank has no contractual or legal obligation to provide a borrower with a modification.

A modification of a mortgage typically includes one or more of the following components:
A change in the loan’s term, often resulting in a longer term than was the case prior to the note’s modification;
The waiver or capitalizing of the fees, charges and penalties associated with the loan’s delinquency or otherwise;
The reduction or forgiveness of principal associated with the note;
A change in the interest rate associated with the note, such as the lowering of the applicable interest rate or the conversion of a interest rate from an adjustable to a fixed interest rate; and/or
A trial period, typical three months in length, to demonstrate the borrower’s ability to make payment on a permanent modification.

There are many types of modifications, the availability of which varies significantly depending upon the entities or persons that have invested in the note, the extent to which the borrower is delinquent, and the borrower’s overall financial situation. The Federal Home Affordable Modification Program (“HAMP”), the most commonly referred to modification program was created in connection with the United States federal government’s Making Home Affordable Program. HAMP has become the gold standard modification program and has served as a template for many modification programs that are not formerly associated with HAMP.However, not all investors participate in HAMP, and even within HAMP there is variation regarding the criteria and retention options available. For example, FHA loans have a separate and more stringent review process for their own version of HAMP known as FHA-HAMP. There is also a HAMP 2.0 program which relaxes some of the more stringent requirements of HAMP including the requirement the applicant reside in the property.

Aside from HAMP, many loan servicers have created proprietary or in-house modification programs that often incorporate elements of the HAMP program itself. The process of applying for a mortgage modification can be frustrating and confusing. If you are facing foreclosure and are interested in resolving your financial and legal problems by obtaining a modification it may be in your interest to obtain professional counsel.

If you have questions related to mortgage modifications call us today at (973) 500-8024 or (212) 960-8308, or submit your contact information below and we can contact you directly.